Facing the stock markets – Stock Options
The Brazilian stock options market
The main characteristic of the Brazilian stock options market is that just some papers are liquid enough to make it possible the using of some of techniques we usually lay hold.
The stocks that have liquid options are PETR4, VALE5, ITUB4, CIEL3 and few others from banking sector.
A way to show you the liquid ones is one of my challenges. 🙂
As the other markets, there are two kinds of stock options:
Calls – buy option – used for the market raising in value, not necessarily bull market.
Puts – Sell option – Bet on the falling market, not necessarily bear market.
How identify the stock options
The stock option codes are identified by the following symbols: ITUBN26, ITUBB26, CIELN32, VALEN21, PETRO21 and PETRO54. We will discover how to identify them.
I – The radix or base name
The stock option base names are similar of the stocks base names they derive from, and are a 4-letter based code.
Stock options for Petrobras will be PETR, exactly like PETR for the stock;
Stock options for Vale do Rio Doce will be VALE, exactly like VALE for the stock;
Stock options for ITAU Unibanco will be ITUB, similar to ITUB for the stock.
II – The deadlines and option types
The stocks options are identified by letters from A to L for Calls, M to Z for Puts. The letters are related to the deadline.
The Calls and puts has deadlines on the second Tuesday of each month. Example
The ITUBA is a call who the deadline is 18/01/2016;
The ITUBM is a put which the deadline is 18/01/2016;
VALEO is a put which the deadline is 21/03/2016
You can find the exact dates in
http://www.bmfbovespa.com.br/opcoes/opcoes.aspx?Idioma=en-uses
III – The numbers
The numbers try to be related to the strike price. However, due to limited amount of possible numbers, they may not be related to the strike price. Here follow some examples.
ITUBN26 – Put for ITUB4, Strike price 25,68, for February, 15th.
ITUBB26 – Call for ITUB4, Strike price 25,68, for February, 15th.
PETRO54 – Put for PETR4, Strike 5,40 for Mars, 21th.
PETRO21 – Put for PETR4, Strike 4,25 for Mars, 21th.
VALEN21 – Put for VALE5, Strike at 6,62 for February, 15th.
CIELN32 – Put for CIEL3, Strike at 32,23 for February, 15th
The stock options must be authorized by Bovespa (the Brazilian Stock Market) in order to be negotiated.
You can find this information on
http://www.bmfbovespa.com.br/opcoes/opcoes.aspx?Idioma=en-us
and following the tab Authorized series. You can download or search in general or search a specific company.
Timing
Calls and puts will be charged in Day + 1 timeline.
Be aware that to work covered by selling calls you should already have the stock, because stock operations are liquidated in Day + 3.
Dangers
In any part of the world it is too dangerous work with stock options uncovered. We call this unlimited liability.
Taxes
By dealing stock options, all transactions are under the rules of the Brazilian income tax.
For Brazilians, that usually are 15% for day trade and 22,5% for swing trade.
For foreigners, most operations are tax free.
You must sum all of your transactions and if you have profit, you should pay the taxes. If you have no profit, you won’t.
Foreigners can find further details in
http://www.bmfbovespa.com.br/en-us/rules/costs-and-taxation/taxation/taxation.aspx?Idioma=en-us
And Brazilian residents in
You must be logged in to post a comment.